Detroit auto show upbeat after years of gloom: Makers of high-end vehicles set to tap into demand from Baby Boomers

North American International Auto Show upbeat after years of gloom

The buzz around the North American International Auto Show in Detroit this week has hit a positive pitch not heard since the global economic crisis gutted the industry a few years back.

The bulk of the vehicles to be unveiled at the industry’s marquee event in North America this week reflect a renewed sense of optimism around the U.S. economy, with several new full-sized pickup trucks arriving just as the U.S. housing market gathers momentum, a major push by European luxury brands aimed at capturing the interest of Baby Boomers and even a resurgence of alternative powertrains as automakers shake off the recession.

Much of the focus in the buildup to the Detroit auto show will be on General Motors Co., which unveiled its brand new 2014 Chevrolet Corvette Sunday night and will roll out the next generation of its full-sized Chevrolet Silverado and GMC Sierra pickup trucks as well.

Not to be outdone, Ford Motor Co. will also unveil the concept for its 2015 Ford F-150 at the show, hoping to steal some of the thunder from GM’s offerings.

Jesse Toprak, vice-president of industry trends for TrueCar.com, said he expects the mood to be much lighter in Detroit this year than it has been in the past few.

“This is about going to an auto show and being excited about the cars and trucks once again,” he said.

“It used to be, at least over the last couple years, when we went [to the Detroit show] it was like a funeral home. It was depressing. Now, we’re excited again.”

In particular, he noted luxury automakers will be making an aggressive push in Detroit this year as they try to tap into the Baby Boomers’ demand for high-end vehicles, including Mercedes-Benz’s new CLA and E-class and the BMW 4-Series Coupe and X4 concepts, which will be featured at the show.

The luxury segment is one of the fastest growing in the industry and the new Lexus IS will be also showcased alongside the Infiniti Q50 and the Acura NXS in Detroit this week.

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“It used to be that a lot of the luxury and European brands would be sort of low-key in Detroit and let the domestics do their thing,” Mr. Toprak said. “Now they’re shameless.”

That’s partly because the luxury automakers are increasingly becoming more mainstream, with sales in the segment bolstered by high resale values and low interest rates that are making leasing rates the most competitive they have ever been, Mr. Toprak said. But Baby Boomers are also displaying a desire for more sportier vehicles, he said.

“Luxury is coming back with a vengeance, and that’s a little unusual for Detroit,” he said. “The market just feels right for this kind of push for luxury cars.”

This will put even more pressure on domestic luxury brands, like Cadillac, he said, which do well in the middle country, but lack the necessary flash required on either coast.

But it won’t be all glitz and glitter at the show. It is no coincidence that Ford and GM will be showcasing their new full-sized pickups with the U.S. housing market picking up again because truck sales are closely tied to new housing starts, said Jessica Caldwell, senior editor at Edmunds.com, a leading automotive website.

While Ms. Caldwell said she expected the unveiling of the new Corvette to be the talk of the show, the truck market will be its underlying emphasis.

But she also noted that Toyota’s Furia Concept will be unveiled, believed to be a preview for the new Corolla. Honda will also have on display a new CUV concept, both of which will likely attract a lot of attention, she said.

Despite cautious optimism around the U.S. economy, Edmunds.com is still expecting growth in U.S. auto sales to slow in 2013. In 2012, U.S. sales improved 13% year-over-year to 14.5 million. But Edmunds.com is only forecasting sales to grow to between 15 million and 15.5 million units in 2013.

In Canada, DesRosiers Automotive Consultants also estimates auto sales will grow by a modest percentage point this year to roughly 1.7 million units.

Tracy Handler, IHS Automotive senior analyst, said she believes Detroit will be an important show for GM, whose sales failed to keep pace with the broader North American industry in 2012. In Canada, GM’s market share fell to its lowest point in more than 100 years at 13.5%, placing it third in the sales race behind Ford and Chrysler.

Part of that was due to the company’s bankruptcy restructuring, which hindered investment in new vehicles and even deferred the launch of the full-sized pickups until 2013, she said. But she said GM’s vehicles have also been less than inspiring, which is also reflected in its sales.

“They haven’t really gone out on a limb with any of their styling over the past few years. They’ve been very conservative,” Ms. Handler said. “They’ve haven’t been risky at all. They have the product, but it is difficult to get people in the cars and driving them, which is what they need to do.”

GM has also had some marketing blunders, including the botched launch of the Malibu, she said, and has yet to define the road ahead after firing its head of marketing July.

The momentum at Toyota and Honda and an aggressive push by Hyundai and Kia have also eaten into the market shares of all of the Detroit Three in the past year.

But Ms. Handler said there will be plenty of buzz at the show around the new Corvette and pickups. At the same time, she noted that now that GM’s on better footing, the automaker, like its rivals is starting to once again experiment with things like alternative power trains, which she expects will be another major theme of the show.

She said GM will be showcasing the “poster child” for this with its plug-in hybrid sports car, the Cadillac ELR, which should attract a lot of attention but is a niche product.

“The last two years [automakers] had to focus so much on just staying in business,” she said. “So many people weren’t really ready with the downturn in the economy to focus on alternative powertrains. If you needed a new car, you wanted something that was familiar to you.”

That is why so much emphasis has been put on the internal combustion engine in recent years in Detroit, and on “bread and butter cars” like the Honda Accord and Ford Fusion, she said.

“We are starting to see a little more excitement, a little more confidence in the economy. So, you do get to see a little more playing with those alternative powertrains,” she said.